BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 4/2000:
Econometric Analysis of Currency Substitution: A Case of Latvia
Vadims Sarajevs ()
Abstract: The paper provides a comprehensive econometric analysis of
currency substitution for Latvia. Rather than drawing inferences on the
degree of currency substitution from domestic money demand modelling, the
most common approach to empirical analysis of the phenomenon, direct
modelling of currency substitution ratio is ap-plied. Extensive model
construction, estimation, evaluation and testing are per-formed.
Methodological issues are also discussed. No simple policy recommenda-tions
can be made at this stage of research, but a number of instruments are
identi-fied, which can be used by the authorities to influence currency
substitution behaviour.
Keywords: currency substitution; exogeneity; unit roots; causality; cointegration; parameter constancy; (follow links to similar papers)
98 pages, May 20, 2000
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